By Harjeet
The power sector in India has undergone significant progress after Independence. When India became independent in 1947, the country had a power generating capacity of 1,362 megawatt (MW). It is now one of the fastest growing economies with ever increasing demand representing an attractive destination for the power industry. The Indian power sector will add nearly 45,000 MW to its total installed capacity by 2013-14 to the existing production, according to a RNCOS research report, ‘Indian Power Sector Analysis’.
Investment options in Indian power industry
The investment climate is very positive in this sector. Due to the surge in the sector, it has witnessed higher investment flows than envisaged. The Ministry of Power has sent its proposal for addition of 76,000 MW of power capacity in the Twelfth Five Year plan (2012-2017) to the planning commission. The ministry has set a target for adding 93,000 MW in the Thirteenth Five Year Plan (2017-2022).
The industry attracted foreign direct investment (FDI) worth Rs 172.80 crore (US$ 31.57 million) in the month of May 2012.
The Government of India has initiated several reform measures to create a favourable environment for the newly added generating capacity in the country and attract investments from the overseas Indians. The policies and reforms have put in place a highly liberal framework for generation of power in the country.
Government initiatives to boost Indian power sector
The Government of India has initiated several policies to promote and garner investments in the power sector in India. To accelerate capacity addition, several policy initiatives have been undertaken by the Ministry of Power.
In order to attract foreign investments in this sector, the Government of India as per extant policy has permitted 100 per cent FDI under the automatic route in this sector. Accordingly, any foreign power company and non-resident Indians (NRIs) can enter and invest in the Indian power sector through FDI route.
India and Malaysia have agreed to strengthen economic engagement and promote cooperation in renewable energies, and to take necessary steps to encourage their development for mutual benefits, as per Dr Farooq Abdullah, Union Minister for New and Renewable Energy (MNRE).
Growth scenario of Indian power sector
Development of this sector is the key to the economic engagement. The power sector has been receiving adequate priority ever since the process of planned development began in 1950. With a large swathe of rivers and water bodies, India has enormous potential for hydro power. Twelfth Five Year Plan (2012-2017) includes additional 30,000 MW of hydro-electric power generation. India currently has 4.4 gigawatt (GW) of net electricity generation capacity using nuclear fuels (across 20 reactors) and aims to increase it up to 20 GW by 2020; with one of the world’s largest reserves of thorium, India has huge potential in nuclear energy.
India is set to become a global manufacturing hub with investments across the value chain. About 82 GW worth of generation capacity is set to be added during FY11-FY15; future investments will benefit from strong demand fundamentals, policy support, and increasing government focus on infrastructure.
Harjeet is an Indian – born mass-market novelist, who covers the world internet related topics. He writes columns and articles for various websites and internet journals in the domain of Investments and Investing in India.